David Merlin-Jones: This attack on industry is not the way to a green future

HAVING styled itself as “the greenest government ever”, the coalition is now working against its own mandate. By artificially raising British energy costs to among the highest in the world, Energy Secretary Chris Huhne will not only undermine his own agenda, but will damage Yorkshire industry.

Many manufacturers are energy-intensive, so energy costs can constitute up to 70 per cent of their overheads. These industries – chemicals, steel and glass, for instance – are fiercely competitive at the international level, so UK companies cannot pass any rise in cost to the consumer without the risk of losing customers.

Britain is already obliged to make the deepest emission cuts of any industrialised nation – 34 per cent by 2020, and Yorkshire has its own target of 25 per cent by 2016, the only UK region with an individual plan.

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The current approach to meeting these targets is through draconically inflating energy costs, informed by the assumption that this will reduce energy consumption and thereby lower emissions. The cumulative impact of all current climate change legislation means the average energy-intensive company’s energy bill is set to rise astronomically, from £3m to £17.5m by 2020.

The emission reduction will happen, but not as the Government intends. Few firms will be able to survive such a price hike; internationally owned firms will emigrate while others will simply fold. Foreign investment will also dry up, leaving the UK an industrial backwater.

Meanwhile, the Government is intent on raising unilateral costs even further with the new carbon price floor. Who would want to manufacture in the UK when the Government is so anti-industry?

This is not a case of crying wolf. Earlier this month, Tata Steel announced they were closing their Scunthorpe plant, at a potential cost of 1,200 jobs. This is simply the latest of many closures and, if left unchecked, this decimation will creep on.

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Yorkshire has its own energy-intensive chemical cluster, which makes up 10 per cent of the UK’s overall chemical sector, with a substantial turnover of £8bn. As a whole, the British economy is reliant on the chemical sector, which accounts for 15 per cent of all exports: the government cannot afford to squeeze it.

Some 24,000 people are employed by chemical firms in the Yorkshire and Humber area alone. This is substantial figure by itself, but including jobs indirectly reliant on the chemical industry, the total is likely to be nearer 75,000.

Supply chains are crucial in the chemicals sector, and when one supplier folds, this can lead to significant downstream closures, creating an unwelcome domino effect.

Huhne is making the erroneous and dangerous assumption that no-one will notice if the chemical sector disappears; this entirely fails to appreciate that, in terms of employment, the sector itself is only the tip of the iceberg.

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Down in Westminster, it has to be said, there are not many smokestacks and there is not a furnace in sight. The Government has grossly under-estimated the regional impact its policies will have.

The chemical industry is, in fact, environmentally friendly: it produces a myriad of innovations and products that help others reduce their carbon footprint, through reducing emissions or enabling renewable technologies. In Knaresborough, for example, there is a producer of bioethanol, a low-carbon fuel.

This low-carbon economy exists in the present, not some politician’s pipedream, and these green companies rely on other energy-intensive firms both for components and customers.

Recklessly creating British unemployment is bad enough, but sacrificing jobs for zero benefit is irrational.

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By pushing energy-intensive companies out of the UK, they will be forced to settle in other countries such as China, Saudi Arabia or Russia where energy supply is cheap and there are few (if any) emission regulations. This will mean that, though Britain’s emissions would fall, the global levels would continue to rise.

In terms of his policies, Huhne needs to regain a sense of perspective and remember that, while the UK has a part to play, it is only responsible for two per cent of global emissions: combatting climate change is a universal challenge.

The green policy we should be pursuing is one of nurture. Britain is developing its low-carbon manufacturing industry and these products could be exported to the world, to tackle the remaining 98 per cent of emissions. This is good for Britain and good for the world.

For this, the UK needs competitive energy costs that will allow the energy-intensive low-carbon economy to take root, not high prices that force collapse or emigration.

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Only once this is achieved can the coalition call itself “the greenest government ever”.

* David Merlin-Jones isa research Fellow at theindependent think tank Civitas. he specialises ineconomics, energy and Britishmanufacturing. Chain Reactions,his first book, is published today.